The stock market is poised for a tumultuous opening tomorrow following the announcement that President Joe Biden will not seek reelection. This decision is expected to heighten market volatility.
Strategists note that since the Bank of Japan has opted not to raise interest rates, the yen carry-trade is expected to regain traction.
As the Democratic Party scrambles to rally behind a new candidate—Biden has already endorsed Vice President Kamala Harris—economic uncertainty will likely take center stage.
Josh Thompson, CEO of Impact Health USA, stated over the weekend that if Biden confirms his withdrawal from the race, it will likely spark market volatility. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he remarked.
This uncertainty might drive investors toward safe-haven assets like gold, silver, and the Swiss franc, which tend to be more stable during times of political and economic unrest.
Additionally, there could be a pause in the so-called “Trump Trade,” which has gained momentum since former President Donald Trump surpassed Biden in a recent debate and survived an assassination attempt. The Trump Trade essentially reflects how investors respond to the prospect of a second Trump administration. Trump’s presidency had been favorable to business interests, and many expect that sectors like healthcare, banking, cryptocurrency, and oil, as well as companies like Tesla and Trump Media and Technology Group, would benefit from his potential return.
Despite these developments, Ed Mills, a Washington policy analyst at Raymond James, indicated in a note to CNBC that while they would not immediately alter their electoral odds—currently projected at 60% for Trump versus 40% for Biden or a Democrat—a reassessment of the race could stall the current trend in “Trump trade,” though he does not foresee a broader market reaction.